The central bank raised its overnight lending rate to 12% from 7.75%, raised its one-week repo rate to 10% from 4.5% and raised its overnight borrowing rate to 8% from 3.5%. The central bank raised overnight lending in the late liquidity window to 15% from 10.25%--the highest rate charged to Turkish banks if they need to borrow just before local markets close.

The central bank also announced that it will increase the frequency of additional tightening.

Eight economists polled by The Wall Street Journal unanimously forecast that the bank would raise its overnight lending rate by between two and three percentage points from the current level of 7.75% to tighten liquidity and help strengthen the lira.

The Turkish lira had plummeted more than 11% against the dollar since the beginning of January before rebounding some 5% ahead of an expected rate rise on Tuesday. The central bank last week held all its rates steady in its regularly scheduled meeting, sending the currency to record lows against the dollar. On Thursday, the central bank intervened directly in the currency markets to stem the lira's decline, but the central bank's efforts remained ineffective.

Turkish markets have been hit hard by the U.S. Federal Reserve's tapering plans and by local political tensions. A corruption probe launched Dec. 17 has targeted Prime Minister Recep Tayyip Erdogan's allies, forced a cabinet shuffle, further fueled the lira selloff and sent borrowing costs surging.

In October 2011, when the currency sank 20% against the dollar to a then-record low, inflation hit double digits for the first time in three years, the central bank sharply raised overnight lending rate by 350 basis points to 12.5%. In June 2006, the central bank raised its policy rate by 225 basis points.

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